medicaid and the children's health insurance program, or chip, which under current law are exempt from the sequester, could be one area where lawmakers look to make cuts. in 2010, more than 40%-- or about $278 billion states received in overall funding-- went to these two programs. >> looking at past proposals, there is a good chance that something like medicaid would be cut, and that would obviously have direct impact on state budgets. but what it would entail is still unknown. >> reporter: also on the table for lawmakers to consider: municipal bonds. they've traditionally been tax- exempt. if that changes, they could become less attractive as an investment vehicle, and end up raising borrowing costs for states and municipalities. >> it would effectively increase the cost of issuing debt to state and local governments, and it's a real consideration at a time when states and local governments are still in repair mode. >> reporter: while some states have built up rainy day funds, credit rating analysts at s&p say for the first time since the start of the financial crisis, the health of